Flipkart In Dire Straits With Increased Expenses, and Losses Surging Five-Fold!

Must Read

WhatsApp Might Lose 60 Million Indian Users Post Updated Policy Changes, New Survey Reveals!

The Facebook-owned instant messaging platform’s decision to update their privacy and terms of service brought about a...

Uber and Ola In Hot Water: India Authorities Launch Fresh Probe!

The Directorate General of Goods and Services Tax Intelligence (DGGI) sent a summons to Uber and Ola...

Trump Administration Has Landed Its Final Blow On Chinese Companies: Xiaomi Blacklisted!

In its recent move to safeguard national security, the United States’ Trump Administration has decided to go...

In what would be the most self-evident scoop on the plate, Singapore-based Flipkart Group has seen a surge in its total revenue, which, fortunately, has increased at a dramatic pace! The revenue of Flipkart Group during FY’18 ending March 2018, increased over 50%, to Rs 30,164 crore. But does that mean Flipkart is all up for a windfall and is in for a good fiscal year? Well, that’s a two-pronged shot!

Flipkart Group is a holding company of all the companies owned by Flipkart including Flipkart Internet and Flipkart India – the two major B2C and B2B e-commerce arms of Flipkart operating in India.

Although the total revenue of Flipkart Group has increased, one may not outcast the occurrence of losses, that has increased to Rs. 46,895 crores (approx $6,590 million), as well (A whopping five-fold!). These losses come substantially on grounds of finance costs. According to filings of Data Intelligence platform Paper.VC, Flipkart’s revenue in FY18 increased 50%, however, the losses increased simultaneously and have been attributed to “fair value loss on derivative financial instruments”.

Advertisements

“It (finance costs) is not an actual loss. For instance, they have not sold the shares and they continue to hold that. But in terms of real marked-to-market, the actual value has gone down due to certain actions, which resulted in this loss. For that, they have to account the same and downgraded the valuation,” Ajay Agarwal, co-founder of Triage Advisors.

What’s Adding To The Uncertainty Over Flipkart Losses?

The finance costs for a business is referred to the cost, interest and other monetary charges involved in purchasing assets. This means that Flipkart’s finance sec accounts to the total expenditures made in building a project or a business set-up.

The total expenditures of Flipkart Group which have been amply spending to maintain employee satisfaction as well as logistics and advertising factors. Accounting how much Flipkart has spent over the above-mentioned factors, “HUGE” would be the word. Last year in March 2018, Flipkart’s parent spent around Rs 4,472 crores in its wholesale arm, in September it invested approx. Rs 3,463 crores in Flipkart Internet, and in January this year, it pumped Rs 1,431 crores in Flipkart India.

Since March 2018 the company has gone through a round of reshuffle and restructuring. With the founders moving out, Walmart steering control of its operations, and Kalyan Krishnamurthy being appointed as the new CEO, the performance of Flipkart especially for this financial year is held crucial.

Moreover, the rollout of the new FDI guidelines has also led to major changes in the company’s business model.

In consonance with FDI policy for e-commerce which was notified on December 26, 2018, restrictions were imposed on allowing e-commerce platforms to sell products from companies in which they owned a stake. E-tailers couldn’t mandate an online seller to sell products exclusively on their platform. Apparently, for as much as such guidelines, Flipkart Group is anticipated to be a major loss-inducing factor for Walmart in the Financial year 2019-2020.

Advertisements

Amidst Losses, Is Walmart Still Confident About Flipkart?

“Walmart remains extremely confident in the potential of the Indian market and in Flipkart’s ability to lead the e-commerce space. By partnering with Flipkart, Walmart has taken a long-term view of the opportunities and hence is unfazed with any short-term hurdles,” Krishnamurthy wrote in a letter to Flipkart employees.

The Wall Street brokerage firm, Stanley Morgan, had stated that given the new FDI guidelines and recent complications in the Indian e-commerce space as a repercussion, Walmart’s exit from Indian grounds couldn’t be completely out of question. With restrictions on players influencing price and a regulatory check on inventory expenses as well, the hard-time escalates further.

Walmart’s investment in Flipkart is a long-term bet, with clear expectations of reaching $64 Billion by 2020 and $200 Billion by 2026. With the Flipkart Group (The Singapore-based parent entity Flipkart Private Limited) having a firm backing from Global retail giant Walmart [NYSE: WMT], the financials for the ongoing year is expected to complete the puzzle!

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Snapchat Spotlight: A New Way for Creators to Earn Money

Short-form video applications have increased overwhelmingly in popularity in recent times. The surge in this format of...

COVID-19 Unemployment Leading To Ageing Indian Workforce, CMIE Reports

The latest data shared by the CMIE aka Centre for Monitoring Indian Economy has highlighted a huge red flag.

The Slip-Ups Keep On Coming: WhatsApp Web Users’ Mobile Data Leaked On Google

As the developments have unfolded over the past week, the clock for WhatsApp seems to be ticking with every passing minute and...

Trump Administration Has Landed Its Final Blow On Chinese Companies: Xiaomi Blacklisted!

In its recent move to safeguard national security, the United States’ Trump Administration has decided to go after China’s second-biggest smartphone marker...

Huawei Is Gunning For Acquiring A Fifth Of Android’s Userbase With Its Own HarmonyOS!

After Google’s ban on Huawei in 2019, the Chinese-origin tech company is all set to roll out HarmonyOS later in 2021 as...

Battle Lines Are Drawn: Qualcomm’s Latest Acquisition to Challenge Apple, Intel

The quest to gain supremacy creates a butterfly effect for sure. With the challengers and the champion pulling out all stops to...

In-Depth: Dprime

Will ‘TikTok By Microsoft’ Be A Winner?

For the last two years, TikTok has been in the public eye for all sorts of reasons. First, it was the exploded...

Facebook Subscription Model: Looking Beyond Ad Dollars?

Seldom do job listings create a stir this gripping. However, when the job listing in question is a stealth post from Twitter,...

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one...

More Articles Like This